S Corporation distributed land used in its business worth $30,000 (basis $5,000) to its sole shareholder, G.Assuming S has substantial earnings and profits, G's dividend and basis for the property will be

Question

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When an S Corporation with earnings and profits distributes property to a shareholder, the distribution is treated as a dividend to the extent of the property's fair market value ($30,000 in this case). The shareholder's basis in the property received is also its fair market value at the time of the distribution, which is $30,000.

S Corporation Distributed Land Used in Its Business Worth $30,000